News Roundup – Jan 15

How big is California’s budget hole? Try these numbers on for size: Yikes. California has been going down the drain since Gray Davis was booted out. The resulting growth in the intervening years between crises never restored California’s intake to that of before. Instead, lawmakers made more concessions and doled out more spending while relying on issuing bonds and projecting growth to balance the budget. What  a shame. To prevent this from happening in the future, lawmakers can simply adopt Newt Gingrich’s idea of holding revenue and only spending in the current year what the state took in the previous year. As for the present crisis, shared sacrifice by all is required. This means a temporary tax increase in the sales tax, wage cuts for all civil servants in government, layoffs in education, and a reduction in the pay and benefits of teachers and prison guards, whose unions hold lawmakers in Sacramento hostage to constant wage increases. Wayne suggested a very simple way of cutting expenses. Execute all the criminals in California serving murder sentences. Deny them the costly chance to appeal.

Speaking of budget issues, the UC system is already one step ahead of lawmakers in making cuts to student enrollment and raising tuition in anticipation of future budget cuts. Luckily, I am completing my degree before facing the brunt of the cuts, which will surely dent California’s future competitiveness. This reminds me of the cuts that happened back in 2004 before my junior year of high school. Students for the following year were limited to only one science class each year. This significantly impacted my education so that I was only able to take Chem AP during high school. As a result, I had just four real classes during my junior year, was home at lunchtime, and played games all afternoon. God knows that hurt my chances in college apps.

Anyways, revenue streams will only continue to shrink in the future for all branches. Layoffs and foreclosures will cause reduced consumer spending, decreasing income and sales taxes. Of course, the whole mess was started by subprime mortgages, so property tax revenue is bound to fall as well. Now, if the government had saved during times of prosperity, it would actually be able to pursue Keynesian remedies. Remember, when Keynes envisioned deficit spending, he didn’t figure that governments would use it regardless of the economy. He wanted to use the surplus from good times in downturns. Right now, the temptation to use any sitting money for new pet projects is too tempting to government and, given how much debt ordinary Americans are in, to individuals as well.

The alternative, slashing spending, repaying debt, and creating a sovereign wealth fund, is unthinkable. Even in countries with a different political culture, such as Norway, a fund has proven too tempting to politicians. From 1981 to 1997, every single Norwegian sitting government was defeated for reelection because the opposition promised more social spending by using the fund, even though none of the governments actually did so once obtaining office.

Other European countries such as France are facing a crisis in culture. The country is well known for being a center of high fashion, and Paris ranks with London, Tokyo, and New York as the premiere fashion capitals ofthe world. Still, my contacts in France and this article all say that there is a populist backlash against ostentatious displays of wealth. This does not strike me as surprising; I’ve always found obsessing about haute couture to be irrational exuberance.

Meanwhile, in other parts of the world, war is still raging. The Israeli offensive in Gaza has slowed due to international pressure and protests. The UN is also taking a firmer hand after suffering collateral damage from Israeli missiles. My take on the offensive is that rogue elements uncontrolled by mainstream Hamas were the ones breaking the original ceasefire by tossing missiles at Israel. Even if Hamas wanted to, they couldn’t control all the splinter extremist groups that target Israel. Unfortunately, the result is that the Palestinian people see Israel as the aggressor and not Hamas as the one to blame. It’s certainly been a bad PR move and I doubt that Israel is any safer as a result.

In an odd piece of news, despite the economic crisis worldwide, some people are finding clever ways to make money. Undoubtedly, there are crazy people rich enough to pay for the privilege. After all, $3.7 million will tempt even the most devout nun.

The last piece is from the LA Times’s mideast section, surprisingly enough. If one were to study the overseas Chinese population here in California, one would find one consistency in their behaviour – obsessing about name brand schools. For their children, it’s either a UC or the Ivy League. Anyone who deviates will permanently ruin the family name, bring dishonour, lose face, and be cursed to a life of nothingness. Of course, that legacy of Confucian values doesn’t work in America, where the products of intense study usually end up as labourers and engineers rather than managers and leaders.

2 responses to “News Roundup – Jan 15”

  1. Tom Humes

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    Tom Humes

  2. frizia roger

    nice post